Association of Personal Injury Lawyers
A not-for-profit organisation representing injured people

Blog: The Price of Regulation

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The Price of Regulation
| 14 Nov 2014
As the Legal Services Board continues its inquiry into the cost of regulation, it’s worth considering where those costs lie.

The cost of regulation cuts several ways. Law firms are subject to regulatory hurdles which they have to undertake on every case, for example money laundering checks, explaining terms and conditions, or confirming instructions in writing. There is a long list of things that must be done in every case and they cost time and money for a firm to undertake. On a higher value case, the costs form only a tiny percentage of the bill. But on a low value case, the ‘de minimis’ regulatory checks can be a significant part of the overall cost. In personal injury cases, where fixed fees are cut to the bone, the cost of these checks falls squarely on the shoulders of the solicitor, eating away at the profit that can be made on a case. In some cases, the cost of compliance may well contribute to cases being simply unaffordable to run. Too high a cost of compliance can impact on access to justice.

As well as the in-house costs of compliance, law firms face the annual bill for regulatory services, which forms part of business overheads. This regulatory fee coupled with the cost of compliance feeds into lawyers’ hourly rates and, inevitably, the consumer will also carry the cost of regulation through increased legal costs, a larger success fee, or increased insurance premiums. Compliance also undoubtedly slows down the progress of a case, particularly at the start. Time costs money.

So the question is how much regulation is enough? Regulation is there for a reason – the primary reason being to protect the consumer. So it is important that standards are in place, that fraudsters are weeded out, and that clients are given good clear advice on the things that matter so that they can make informed choices. Regulation is about outcomes, monitoring, enforcement, and supervision, and it doesn’t necessarily come cheap. It must however be proportionate, and many lawyers feel that the current cost of regulation is unsustainable.

Hopefully the inquiry will establish whether the level of regulation currently undertaken is necessary – are lawyers subject only to essential regulation or ‘nice to do’ activities that reap little return? Is our current system of regulation and compliance modern, quick, and efficient or time consuming and outdated? Does it match the modern system of working, with huge swathes of business being done online or over the phone? Is it a level playing field between regulators – with solicitors, barristers, legal executives and paralegals often working alongside each other in the same firms are the rules the same? Complexity, as well as time, costs money.

Hopefully, this inquiry by the oversight regulator will be the first step into getting proper regulation at a more proportionate cost.

Past blog entries

Consumers will not benefit from Do-it-Yourself whiplash reforms, 28 Jan 2021
Effects of a change in the discount rate: what happens when a review is expected? , 16 Dec 2020
Three per cent drop in premiums does not reflect massive insurer savings, 09 Nov 2020
What help is out there for families when someone is injured?, 02 Nov 2020
Blindly heading into the unknown for injured people?, 09 Dec 2019
Lessons in looking after one another , 18 Nov 2019
‘Fake claims’ or ‘fake news’?, 06 Nov 2019
The tide of public opinion is turning against insurers, 15 Oct 2019

About this blog

I'm Mike Benner, APIL's Chief Executive Officer. I shall be using this blog to keep you informed about campaigning and political work carried out by APIL.